10-Q 1 box-20220430.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36805

 

Box, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

20-2714444

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

900 Jefferson Ave.

Redwood City, California 94063

(Address of principal executive offices and Zip Code)

(877) 729-4269

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value 
per share

 

BOX

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Small reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

As of May 31, 2022, the number of shares of the registrant’s Class A common stock outstanding was 144,057,397.

 

 

 


 

TABLE OF CONTENTS

 

 

 

PART I – FINANCIAL INFORMATION

 

Page

Item 1.

 

Financial Statements (Unaudited)

 

5

 

 

Condensed Consolidated Balance Sheets as of April 30, 2022 and January 31, 2022

 

5

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended April 30, 2022 and 2021

 

6

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended April 30, 2022 and 2021

 

7

 

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' (Deficit) Equity for the Three Months Ended April 30, 2022 and 2021

 

8

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2022 and 2021

 

9

 

 

Notes to Condensed Consolidated Financial Statements

 

10

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

Item 4.

 

Controls and Procedures

 

35

 

 

PART II – OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

36

Item 1A.

 

Risk Factors

 

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

58

Item 6.

 

Exhibits

 

59

 

 

Signatures

 

60

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

our future financial and operating results; including expectations regarding revenues, deferred revenue, billings, remaining performance obligations, gross margins, operating income, and net retention rate;
our ability to maintain an adequate rate of revenue and billings growth and our expectations regarding such growth;
our market opportunity, business plan and ability to effectively manage our growth;
our ability to achieve profitability and expand or maintain positive cash flow;
our ability to achieve our long-term margin objectives;
our ability to grow our remaining performance obligations;
our expectations regarding our revenue mix;
our ability to maintain, protect and enhance our brand and intellectual property;
costs associated with defending intellectual property infringement and other claims and the frequency of such claims;
our ability to attract and retain end-customers;
our ability to further penetrate our existing customer base;
our ability to displace existing products in established markets;
our ability to expand our leadership position as a cloud content management platform;
our ability to timely and effectively scale and adapt our existing technology;
our ability to innovate new products and features and bring them to market in a timely manner and the expected benefits to customers and potential customers of our products;
our investment strategy, including our plans to further invest in our business, including investment in research and development, sales and marketing, our data center infrastructure and our professional services organization, and our ability to effectively manage such investments;
our ability to expand internationally;
expectations about competition and its effect in our market and our ability to compete;
the effects of seasonal trends on our operating results;
use of non-GAAP financial measures;
our belief regarding the sufficiency of our cash, cash equivalents and our credit facilities to meet our working capital and capital expenditure needs for at least the next 12 months;
our expectations concerning relationships with third parties;
our ability to attract and retain qualified employees and key personnel;
our ability to realize the anticipated benefits of our partnerships with third parties;
the effects of new laws, policies, taxes and regulations on our business;
management’s plans, beliefs and objectives, including the importance of our brand and culture on our business;
our ability to maintain, protect and enhance our brand and intellectual property;

3


 

acquisitions of or investments in complementary companies, products, services or technologies and our ability to successfully integrate such companies or assets;
the KKR-led investment in Box and achievement of its potential benefits;
any potential repurchase of our Class A common stock;
the potential impact of shareholder activism on Box’s business and operations;
the impact of the Russian invasion of Ukraine on our business and operating results; and
the impact of public health epidemics or pandemics, such as the COVID-19 pandemic, and governmental responses thereto.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

4


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

BOX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

April 30,

 

 

January 31,

 

 

 

2022

 

 

2022

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

391,377

 

 

$

416,274

 

Short-term investments

 

 

127,889

 

 

 

170,000

 

Accounts receivable, net

 

 

117,146

 

 

 

256,312

 

Deferred commissions

 

 

45,021

 

 

 

46,025

 

Other current assets

 

 

33,987

 

 

 

27,953

 

Total current assets

 

 

715,420

 

 

 

916,564

 

Property and equipment, net

 

 

92,043

 

 

 

105,755

 

Operating lease right-of-use assets, net

 

 

163,674

 

 

 

172,808

 

Goodwill

 

 

72,855

 

 

 

74,466

 

Deferred commissions, non-current

 

 

69,335

 

 

 

72,884

 

Other long-term assets

 

 

58,260

 

 

 

49,532

 

Total assets

 

$

1,171,587

 

 

$

1,392,009

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

46,459

 

 

$

58,942

 

Accrued compensation and benefits

 

 

23,972

 

 

 

54,705

 

Finance lease liabilities

 

 

38,455

 

 

 

41,235

 

Operating lease liabilities

 

 

45,741

 

 

 

44,608

 

Deferred revenue

 

 

458,084

 

 

 

519,485

 

Total current liabilities

 

 

612,711

 

 

 

718,975

 

Debt, net, non-current

 

 

367,934

 

 

 

367,463

 

Finance lease liabilities, non-current

 

 

13,278

 

 

 

20,836

 

Operating lease liabilities, non-current

 

 

156,096

 

 

 

168,192

 

Deferred revenue, non-current

 

 

10,266

 

 

 

14,757

 

Other long-term liabilities

 

 

6,916

 

 

 

8,993

 

Total liabilities

 

 

1,167,201

 

 

 

1,299,216

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Series A convertible preferred stock, par value of $0.0001 per share; 500 shares (unaudited) authorized, issued and outstanding as of April 30 and January 31, 2022

 

 

488,351

 

 

 

487,880

 

Stockholders’ deficit:

 

 

 

 

 

 

Class A common stock, par value $0.0001 per share; 1,000,000 shares authorized; 145,598 shares (unaudited) and 145,081 shares issued and outstanding as of April 30 and January 31, 2022, respectively

 

 

15

 

 

 

15

 

Additional paid-in capital

 

 

892,067

 

 

 

972,020

 

Accumulated other comprehensive loss

 

 

(8,769

)

 

 

(4,543

)

Accumulated deficit

 

 

(1,367,278

)

 

 

(1,362,579

)

Total stockholders’ deficit

 

 

(483,965

)

 

 

(395,087

)

Total liabilities, convertible preferred stock and stockholders’ deficit

 

$

1,171,587

 

 

$

1,392,009

 

 

See notes to condensed consolidated financial statements.

5


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 30,

 

 

 

2022

 

 

2021

 

Revenue

 

$

238,432

 

 

$

202,441

 

Cost of revenue

 

 

62,209

 

 

 

60,947

 

Gross profit

 

 

176,223

 

 

 

141,494

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

61,733

 

 

 

50,859

 

Sales and marketing

 

 

83,067

 

 

 

69,811

 

General and administrative

 

 

30,799

 

 

 

31,087

 

Total operating expenses

 

 

175,599

 

 

 

151,757

 

Income (loss) from operations

 

 

624

 

 

 

(10,263

)

Interest and other expense, net

 

 

(4,157

)

 

 

(3,999

)

Loss before provision for income taxes

 

 

(3,533

)

 

 

(14,262

)

Provision for income taxes

 

 

1,166

 

 

 

311

 

Net loss

 

 

(4,699

)

 

 

(14,573

)

Dividend on series A convertible preferred stock

 

 

(3,695

)

 

 

 

Accretion of series A convertible preferred stock

 

 

(527

)

 

 

 

Net loss attributable to common stockholders

 

$

(8,921

)

 

$

(14,573

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.06

)

 

$

(0.09

)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

 

 

144,725

 

 

 

161,733

 

 

 

See notes to condensed consolidated financial statements.

6


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 30,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(4,699

)

 

$

(14,573

)

Other comprehensive (loss) income:

 

 

 

 

 

 

Net foreign currency translation (loss) gain

 

 

(5,266

)

 

 

273

 

Net unrealized gain on cash flow hedge

 

 

1,064

 

 

 

294

 

Net unrealized loss on available-for-sale securities

 

 

(24

)

 

 

 

Other comprehensive (loss) income

 

 

(4,226

)

 

 

567

 

Comprehensive loss

 

$

(8,925

)

 

$

(14,006

)

 

See notes to condensed consolidated financial statements.

7


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

(Unaudited)

 

 

 

Three Months Ended April 30, 2022

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance as of January 31, 2022

 

 

500

 

 

$

487,880

 

 

 

 

145,081

 

 

$

15

 

 

$

972,020

 

 

$

(4,543

)

 

$

(1,362,579

)

 

$

(395,087

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

4,159

 

 

 

 

 

 

(27,394

)

 

 

 

 

 

 

 

 

(27,394

)

Stock consideration in connection with fiscal 2022 acquisition

 

 

 

 

 

 

 

 

 

559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,785

 

 

 

 

 

 

 

 

 

61,785

 

Accretion and dividend on series A convertible preferred stock, net of dividends paid

 

 

 

 

 

471

 

 

 

 

 

 

 

 

 

 

(4,221

)

 

 

 

 

 

 

 

 

(4,221

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

(4,201

)

 

 

 

 

 

(110,123

)

 

 

 

 

 

 

 

 

(110,123

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,226

)

 

 

 

 

 

(4,226

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,699

)

 

 

(4,699

)

Balance as of April 30, 2022

 

 

500

 

 

$

488,351

 

 

 

 

145,598

 

 

$

15

 

 

$

892,067

 

 

$

(8,769

)

 

$

(1,367,278

)

 

$

(483,965

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended April 30, 2021

 

 

 

Series A Convertible
Preferred Stock

 

 

 

Class A Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of January 31, 2021

 

 

 

 

$

 

 

 

 

159,851

 

 

$

16

 

 

$

1,473,666

 

 

$

(938

)

 

$

(1,321,679

)

 

$

151,065

 

Cumulative adjustment due to adoption of ASU 2020-06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(68,576

)

 

 

 

 

 

559

 

 

 

(68,017

)

Issuance of common stock under employee equity plans, net of shares withheld for employee payroll taxes

 

 

 

 

 

 

 

 

 

2,911

 

 

 

 

 

 

(1,878

)

 

 

 

 

 

 

 

 

(1,878

)

Stock consideration in connection with fiscal 2022 acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

Stock-based compensation related to stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47,649

 

 

 

 

 

 

 

 

 

47,649

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

567

 

 

 

 

 

 

567

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,573

)

 

 

(14,573

)

Balance as of April 30, 2021

 

 

 

 

$

 

 

 

 

162,762

 

 

$

16

 

 

$

1,460,861

 

 

$

(371

)

 

$

(1,335,693

)

 

$

124,813

 

 

 

See notes to condensed consolidated financial statements.

 

8


 

BOX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(4,699

)

 

$

(14,573

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

18,536

 

 

 

19,380

 

Stock-based compensation expense

 

 

47,110

 

 

 

41,790

 

Amortization of deferred commissions

 

 

13,145

 

 

 

10,517

 

Other

 

 

299

 

 

 

443

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

136,876

 

 

 

116,835

 

Deferred commissions

 

 

(9,059

)

 

 

(7,927

)

Operating lease right-of-use assets, net

 

 

9,992

 

 

 

10,852

 

Other assets

 

 

(15,368

)

 

 

(8,816

)

Accounts payable, accrued expenses and other liabilities

 

 

(18,450

)

 

 

(11,906

)

Operating lease liabilities

 

 

(11,866

)

 

 

(13,927

)

Deferred revenue

 

 

(58,786

)

 

 

(47,896

)

Net cash provided by operating activities

 

 

107,730

 

 

 

94,772

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of short-term investments

 

 

(37,883

)

 

 

(50,000

)

Maturities of short-term investments

 

 

80,000

 

 

 

 

Purchases of property and equipment, net of sale proceeds

 

 

(558

)

 

 

(1,145

)

Capitalized internal-use software costs

 

 

(2,532

)

 

 

(1,178

)

Acquisitions, net of cash acquired

 

 

(300

)

 

 

(56,642

)

Other

 

 

(315

)

 

 

 

Net cash provided by (used in) investing activities

 

 

38,412

 

 

 

(108,965

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Repurchases of common stock

 

 

(117,240

)

 

 

 

Payments of dividends to preferred stockholders

 

 

(3,750

)

 

 

 

Proceeds from issuances of common stock under employee equity plans

 

 

14,464

 

 

 

13,866

 

Employee payroll taxes paid for net settlement of stock awards

 

 

(41,839

)

 

 

(15,684

)

Principal payments of finance lease liabilities

 

 

(11,503

)

 

 

(13,262

)

Other

 

 

(2,323

)

 

 

(3,768

)

Net cash used in financing activities

 

 

(162,191

)

 

 

(18,848

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(8,501

)

 

 

(211

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(24,550

)

 

 

(33,252

)

Cash, cash equivalents, and restricted cash, beginning of period(1)

 

 

416,888

 

 

 

595,511

 

Cash, cash equivalents, and restricted cash, end of period(1)

 

$

392,338

 

 

$

562,259

 

 

(1) Restricted cash is included in other current assets for the periods presented.

 

 

See notes to condensed consolidated financial statements.

9


 

BOX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. Description of Business and Basis of Presentation

Description of Business

We were incorporated in the state of Washington in April 2005, and were reincorporated in the state of Delaware in March 2008. We changed our name from Box.Net, Inc. to Box, Inc. in November 2011. Box provides a leading cloud content management platform that enables organizations of all sizes to securely manage cloud content while allowing easy, secure access and sharing of this content from anywhere, on any device.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of April 30, 2022 and the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss, the condensed consolidated statements of convertible preferred stock and stockholders’ (deficit) equity, and the condensed consolidated statements of cash flows for the three months ended April 30, 2022 and 2021, respectively, are unaudited. The condensed consolidated balance sheet data as of January 31, 2022 was derived from the audited consolidated financial statements that are included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022 (the Form 10-K), which was filed with the Securities and Exchange Commission (the SEC) on March 16, 2022. The accompanying statements should be read in conjunction with the audited consolidated financial statements and related notes contained in our Form 10-K. There have been no other material changes to our critical accounting policies and estimates during the three months ended April 30, 2022 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements. In the opinion of our management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in the Form 10-K and include all adjustments necessary for the fair presentation of our balance sheet as of April 30, 2022, and our results of operations, including our comprehensive loss, our convertible preferred stock and stockholders’ (deficit) equity, and our cash flows for the three months ended April 30, 2022 and 2021. All adjustments are of a normal recurring nature. The results for the three months ended April 30, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending January 31, 2023.

Certain prior period amounts reported in our condensed consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation. Such reclassifications did not affect total revenues, operating income (loss), or net income (loss).

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ from these estimates. Such estimates include, but are not limited to, the fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, timing and costs associated with our asset retirement obligations, the standalone selling price allocation included in contracts with multiple performance obligations, the expected benefit period for deferred commissions, the useful life of capitalized internal-use software costs, the incremental borrowing rate we use to determine our lease liabilities, the valuation of deferred income tax assets, and unrecognized tax benefits, among others. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Certain Risks and Concentrations

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed deposit insurance coverage limits.

10


 

We sell to a broad range of customers. Our revenue is derived primarily from the United States across a multitude of industries. Accounts receivable are derived from the delivery of our services to customers primarily located in the United States. We accept and settle our accounts receivable using credit cards, electronic payments and checks. A majority of our lower dollar value invoices are settled by credit card on or near the date of the invoice. We do not require collateral from customers to secure accounts receivable. We maintain an allowance for doubtful accounts based upon the expected collectability, which takes into consideration specific customer creditworthiness and current economic trends. We believe collections of our accounts receivable are probable based on the size, industry diversification, financial condition and past transaction history of our customers. As of April 30, 2022, no single customer accounted for more than 10% of total accounts receivable. As of January 31, 2022, one reseller, which is also a customer, accounted for more than 10% of total accounts receivable. No single customer represented over 10% of our revenue for the three months ended April 30, 2022 and 2021.

We serve our customers and users from data center facilities operated by third parties. In order to reduce the risk of down time of our subscription services, we have established data centers and third-party cloud computing and hosting providers in various locations in the United States and abroad. We have internal procedures to restore services in the event of disaster at any one of our current data center facilities. Even with these procedures for disaster recovery in place, our cloud services could be significantly interrupted during the implementation of the procedures to restore services.

Geographic Locations

For the three months ended April 30, 2022 and 2021, revenue attributable to customers in the United States was 66% and 69%, respectively. For the three months ended April 30, 2022 and 2021, revenue attributable to customers in Japan was 19% and 17%, respectively.

As of April 30, 2022 and January 31, 2022, substantially all of our property and equipment was located in the United States.

Summary of Significant Accounting Policies

Marketable Securities

We classify our marketable securities as available-for-sale securities as we may sell these securities at any time for use in operations or for other purposes. We record such securities at fair value in our condensed consolidated balance sheet, with unrealized gains or losses reported as a component of accumulated other comprehensive loss. The amount of unrealized gains or losses reclassified into earnings is based on specific identification when the securities are sold. We periodically evaluate if any security has experienced credit-related declines in fair value, which are recorded against an allowance for credit losses with an offsetting entry to interest and other expense, net on the condensed consolidated statement of operations.

There have been no other material changes to our significant accounting policies during the three months ended April 30, 2022 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended January 31, 2022.

Note 2. Revenue

Contract Assets

Contract assets, which are presented within accounts receivable, was $1.5 million and $1.1 million as of April 30, 2022 and January 31, 2022, respectively.

Deferred Revenue

Deferred revenue was $468.4 million and $534.2 million as of April 30, 2022 and January 31, 2022, respectively. During the three months ended April 30, 2022 and 2021, we recognized $202.4 million and $167.4 million of revenue that was included in the deferred revenue balance as of January 31, 2022 and 2021, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of April 30, 2022, we had remaining performance obligations from contracts with customers of $1.0 billion. We expect to recognize revenue on 62% of these remaining performance obligations over the next 12 months, with the substantial majority of the remaining balance expected to be recognized within 24 months.

11


 

Note 3. Fair Value of Financial Instruments

The amortized cost, unrealized gain (loss) and estimated fair value of marketable securities were as follows (in thousands):

 

 

 

April 30, 2022

 

 

 

Amortized Cost

 

 

Unrealized Gain

 

 

Unrealized Loss

 

 

Estimated Fair Value

 

Cash equivalents: